Rising Tensions in the Middle East Weigh on Crypto Markets

Escalating tensions in the Middle East have sparked a cautious mood in global markets, leading to a decline in the cryptocurrency market. Data shows Bitcoin dropped by around 4% in the first two days of October, starkly contrasting with its average 20% surge throughout the month of October over the past decade.

Sean McNulty, head of trading at liquidity provider Arbelos Markets, believes this sell-off is a "temporary setback" considering the Federal Reserve's initiated rate cuts. He also anticipates a more favorable regulatory environment for the cryptocurrency industry after the US presidential elections in November. McNulty adds, "October has historically been a strong month for Bitcoin, and this seasonal trend remains intact."

Recently, the trajectory of digital assets has become increasingly aligned with the stock market, suggesting that macroeconomic drivers like the Federal Reserve's monetary policy outlook are currently paramount for Bitcoin. The 50-day correlation coefficient between the top 100 cryptocurrencies and the MSCI Inc. Global Stock Index stands at 0.65, marking the highest level since 2022. A reading of 1 indicates perfectly synchronized movement, while a reading of -1 signifies opposing trends. (Bloomberg)